How to Pay Off Debt with No Money – Complete A-Z Guide with FAQs & More

Are you struggling to get out of debt because you don’t have money? 

Financial setbacks can occur often when you’re repaying your debt. Disaster may strike at any moment. 

To help you out, I’ve compiled a comprehensive guide that covers your options when you’re in debt and have no money.

Is it Really Possible to Get Out of Debt with No Money?

Yes, it is possible to go debt free even when you don’t have money.

However, in most instances, it’s not a walk in the park and can be rather burdensome for your financial freedom and your image as a borrower.

The methods you may employ for getting out of debt even when you don’t have money in the present vary from insolvency solutions to selling your assets to generating new income streams to making a budget and following it religiously.

As you manage debt, you’ll also want to cut down on your spending.

Do try to get free grants from the government, try to reduce your credit card interest, and maybe even consider personal loans.

How Bad Can it Actually Get?

For one, being in debt can drastically decrease your living standards.

Once the debt keeps piling on, it does a number on your credit score. A poor credit score basically means that both individual lenders and companies will be much less willing to lend you money in the future.

Besides the loss of your financial freedom, you’re constantly hounded by the fear of creditors and debt collection agencies threatening to take you to court, ruin your public image, and drain you of every penny you’ve got.

All of this may take quite a toll on your mental health, with debt stress leading to insomnia, high blood pressure, anxiety, and other serious ailments.

how to pay off debt with no money

Can You Go to Jail for Being Unable to Pay Debts?

No, you can’t go to jail just because you’re unable to pay your debt.

This is something people in England and Wales are often unaware of, and debt collection agencies take advantage of this.

When it comes to monthly payments, if you can’t pay and you can prove it in court, you won’t go to prison for it. You do have insolvency options to get back on your feet, but they don’t come without certain financial restrictions.

You can only go to prison if you’ve knowingly committed fraud in matters related to your debts and personal loans.

Possible Options to Pay off Debt with No Money

In this section, I’ll mention the options you may avail to pay off debt when you’re strapped for cash.

Let’s discuss each one individually:

Consider Bankruptcy

If you don’t have money at all and can’t see a way out, consider filing for bankruptcy.

Bankruptcy is a legal procedure where, once approved, you can get all your debts written off.

This, of course, usually only happens if you can prove that you don’t own the required assets that would allow you to go debt free.

Once the procedure is successful, your assets are taken from you and are used to contribute to your debt payments.

Even though bankruptcy does allow you a fresh start, it comes with certain financial limitations and restrictions that the court needs you to abide by.

These restrictions may look like a bad credit rating, an upper-limit on the amount you’re allowed to borrow for a certain period, or other restrictions the court sees fit.

Once you go bankrupt, you won’t be chased by your creditors or debt collection agencies. You’ll be completely debt-free.

Individual Voluntary Agreement

An IVA allows you to avail the option of partial repayments over a particular period of time.

Once you get an IVA, your creditors can’t take you to court as long as it’s valid.

One key benefit that an IVA has over filing for bankruptcy is that it gives you more freedom, financially speaking, over your assets and valuables. When you go bankrupt, a lot of your assets are likely taken away from you.

On the flip side, it’s very difficult to qualify for an Individual Voluntary Agreement.

Want to know how difficult it is? Well, you’re required to provide information about your income, creditors, debts, and your assets, and even then, you’ll only get a valid IVA once creditors that hold 75% if your complete debts agree to the document and the conditions.

Debt Relief Order

A Debt Relief Order, or DRO for short, is basically a legal procedure that allows you an extra year’s worth of time to get back on your feet and manage your debts.

Technically speaking, a DRO, once approved by the court, gives you a full year where your creditors can’t take you to court or ask you to repay them.

In theory, a DRO should be a win-win, since it not only gives you a whole year to figure out how to pay back your debts, it even prevents creditors from coming after you and threatening court action against you.

However, in practice, a DRO is only applicable on certain types of debt, so it’s not a universally applicable insolvency solution.

Also, it can take quite a hit on your credit rating, so be prepared for the consequences of what you choose to do.

Seek Government Help

The British government offers you a few solutions if your income is low and you’re finding it difficult to get out of debt.

For one, you may apply for tax credits, which are state-sponsored benefits, and they ensure financial support for disabled workers, children, and even low-income workers.

Don’t worry if you’re not paying tax or National Insurance, because tax credits are tax-free, which means they’re not conditional upon whether you pay tax or not.

Other ways to seek help from the government include applying for pension credit or child support benefits. You should definitely also check if you’re eligible for State benefits, and even if you meet the requirements for a free grant from the State.

Seek Free Debt Help

There’s nothing to be ashamed of if you’re not able to manage your debt on your own.

I think it would do many debt-ridden people a lot of good if they were to seek out individuals and organizations that provide help with debts.

Some may offer in-person advice, others will offer telephonic or online counselling. In any event, find what works for you and make sure you learn as much as possible from them.

Also, when you don’t have money, the thought of giant business conglomerates and savvy businessmen fleecing you when you ask for debt help can be rather intimidating.

There are hundreds of professionals and companies that offer free debt help to people that can’t afford to pay to seek advice. Your job is to research and find the most appropriate one for yourself.

Try to Reduce Credit Card Interest

The next thing you should definitely try to do is to reduce the interest on your credit cards.

This is very important, because the more interest you have, the bigger a total sum it amounts to when you’re only paying the bare minimum back on your credit card debt each month.

So how should you go about trying to reduce credit card interest?

The best way to try to do so is to improve your credit rating and then contact your credit card company and ask them for a lower interest rate on your credit card debt.

This may not always work, so do be prepared for a few setbacks along the way.

Talk to Your Creditors About Extensions or Reduction in Debt

Another option you may want to avail is to contact your creditors and inform them of your situation as honestly as possible.

In my experience, there’s actually a very good chance that your creditors will agree to an informal Debt Management Plan that allows you to pay them back in instalments at a specified interest rate.

Also, talk to them honestly about whether a reduction in your debt amount or the interest rate is possible.

There’s actually a good chance that you’ll come to some sort of an agreement, since court action will take quite a hefty financial toll on your creditor as well.

Check Your Eligibility for Free Grants, Allowances, etc.

When you don’t have money for your monthly payments, it can often be useful to check if you’re eligible for any free grants or allowances from both the government and charities.

Generally, when you’re in a financial fix, you’ll find yourself eligible for several free grants and allowances to help with your debts.

These grants range from grants for education, healthcare, and even basic utilities.

FAQs – Debt Management with No Money

Should I pay off all debt once or in monthly payments?

In most scenarios, you should try to pay off your debt as quickly as possible, so in most cases, a lump sum payment is preferable over a monthly payment scheme.

However, if you don’t have money, I recommend paying your loans with higher interest as quickly as possible, while making the minimum monthly payment on the lower interest ones.

Can I pay my credit card bill if I have no money?

You can get out of card debt by utilizing a balance transfer facility, converting your payment to EMIs, and paying off high-interest loans first.

Also try requesting your card company to cut your interest rate and taking advantage of the holiday cycle.

What is the fastest way to pay off debt?

The fastest ways to make sure you go debt free is to pay more than the minimum amount required each month, generating multiple streams of income, considering insolvency options, making a budget, getting help from the government, and, in some cases, a personal loan.

Do I have to pay interest and fees?

Yes, in most scenarios, you’ll have to pay interest and fees if your lender wants you to.

There are a few ways to avoid paying interest on certain loans, such as card debt, by transferring your balance to a card with 0% introductory APR.

Final Thoughts

I know how difficult it can be to be trapped in debt and have no idea of where to go and what to do.

This guide was intended to teach you about your options if you’re stuck in debt with no money, and I hope it did just that!


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